Saturday 20 January 2018

IMF swoops to slash and burn Irish banking

Chinese and Asian funds may bankroll our bailout

Ajai Chopra[ left] Dept Director of the IMF European Department pictured as he made his way to the Central Bank HQ. Photo: Frank McGrath
Ajai Chopra[ left] Dept Director of the IMF European Department pictured as he made his way to the Central Bank HQ. Photo: Frank McGrath

Shane Ross and Nick Webb

The arrival of the IMF in Dublin means that "only half of Ireland's six big banks may be there this time next year", according to Conor O'Kelly, the boss of NCB --one of the country's top stockbrokers.

Listing AIB, Bank of Ireland, Irish Life & Permanent, Ulster Bank, Anglo Irish Bank and the EBS as in the firing line, the stockbroking chief is among many leading financiers who see a watershed in Irish banking, following the arrival of the IMF and European Central Bankers last week.

The Chinese and other Asian sovereign wealth funds are believed to be prepared to shell out to effectively fund any bailout by buying bonds issued by the EU bailout fund. They are also likely to be targeted as potential buyers for Irish banks by the NTMA, dependent on negotiations with the IMF and EU officials.

However, any sale of Irish banks would be dependent on some form of guarantee to protect the buyer from future losses. The situation could be further complicated by the increased likelihood that some of AIB's bondholders will face a haircut on their investment, according to banking sources.

Jim Power, economist with Friends First, is gloomy about the Irish banks' prospects.

"If I were Brian Lenihan, I would pick up the telephone to Santander bank in Spain and offer AIB to them for a euro; but he would find no buyer," said Power.

"The Irish banking system is fundamentally finished," predicted the Friends First financial guru, who once worked for Bank of Ireland, adding that "for the future, we will have a State-run banking system. We must get back to a basic banking model -- intermediating between savers and borrowers".

Fergus Murphy, chief executive of the troubled EBS, believes that the takeover of the building society will continue despite the proposed shakeout in the sector.

"We are having positive meetings every day with both bidders for EBS. Both projects are still possible.

"The arrival of the IMF and the EU could help to speed up the transaction and the due diligence that is currently going on," he said.

But one unnamed insider claimed that a takeover of the EBS by Irish Life & Permanent was "on the backburner". "The EBS will need to find a place in the overall consolidation process. It will not be a priority for the IMF," the source said. "There are strong rumours that AIB may be forced to merge with Bank of Ireland to make one stronger bank as part of an inevitable move towards consolidation."

Sunday Independent

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